Clearpool Explained in 3 Simple Points
As Clearpool moves from the Testnet and onto the Mainnet, we’ve been receiving more and more questions on what exactly we do. With our protocol being the first in the market, we’d like to offer a simple explanation of what Clearpool is. Read on to learn what Clearpool does and how it’s going to change borrowing and lending for both institutions and retail investors alike.
1. Unlocking the Credit Markets 🔓
Clearpool provides a platform that opens up the credit markets to both institutional and retail investors. But what does this really mean?
The credit market is where institutions look when they require capital but don’t want to sell equity. Think of it as an unsecured loan they take out from investors. In return, investors get their money back plus interest after a set period of time.
Traditionally, at least one large financial institution (usually several) would originate the loan, with many more participating as investors. This means that the value accrues to these larger institutions, and leaves retail investors overlooked.
Clearpool takes this concept, applies the principles of decentralization and the benefits of cryptography, to level the playing field, and gives everyone (whether you’re a large investment fund, crypto whale or everyday retail DeFi user) the ability to access the value that these borrowing and lending opportunities create.
2. Earn Profit Without Stress 🧘♂️
The biggest difference to traditional credit markets is that Clearpool removes all central intermediaries, and subsequent layers of cost and friction, which enables higher and properly priced returns for lending stablecoins (USD pegged digital assets).
Lenders get risk-adjusted rates of interest, paid in stablecoins, plus additional rewards paid in the protocol’s native token CPOOL. This makes Clearpool one of the most attractive venues for lending in DeFi.
Before an institution can become a borrower on Clearpool, it must become whitelisted. They must provide certain information and pass a KYC (Know Your Customer) process, to verify their identity and prove that they are legitimate.
Once this is complete, the Clearpool team will assess the information, and make a decision on whitelisting. Later, the Clearpool community (CPOOL holders) will be able to participate in whitelist voting.
Whitelisted borrowers can subsequently launch a single-borrower liquidity pool and compete for liquidity directly from the DeFi ecosystem. Anybody can be a lender, all you need is a web3 wallet such as MetaMask. Connecting to the app is simple, and once connected you will see all available borrower pools. Clicking on a pool will show you more details about the borrower, their credit score, and the rate of interest + rewards that you can earn for lending to that pool.
The interest rate paid by the borrower is dynamic, which means it varies depending on the utilization ratio of the pool (the percentage of the total funds in the pool that the borrower is currently utilizing). This means lenders’ returns are based on real-time risk ensuring your returns are fair.
Simply put — Clearpool follows the real-time demand and supply of your lending activities and offers extra rewards to provide a fair and competitive return.
3. Shape the Future of our Platform as you Earn 🗳
We mentioned how you can earn CPOOL tokens through the lending process. CPOOL is Clearpool’s governance token. It is a liquid digital asset that trades on various exchanges. The CPOOL token also has a significant amount of utility, which helps to power the Clearpool ecosystem.
Holders can stake CPOOL on the Clearpool app to earn staking rewards, regardless of whether they are a lender or not. Locking staked tokens for a longer period increases the rewards, and also gives you more power for CPOOL farming through what is called a multiplier level.
CPOOL farming allows lenders to stake their cpTokens, which are tokens that they receive when they lend to a borrower pool (we will cover cpTokens in more detail in a subsequent post) to increase the additional CPOOL rewards that they earn for being a lender. The rewards that you earn for farming (staking cpTokens) depend on your multiplier level, which as we mentioned earlier is achieved through CPOOL staking.
This mechanism incentivises the purchasing, holding and locking of CPOOL tokens for all types of lenders, including large institutional players. This creates more demand for the token in the open market. Additionally, all borrowers must also be staking CPOOL — even more demand!
Did we mention CPOOL is deflationary?! Yes, CPOOL has a declining total supply thanks to a buyback mechanism through protocol revenue. We will cover that more in a subsequent post, but for now, just visualize all that demand for a token that’s supply is shrinking!
Finally, CPOOL will eventually give its holders the ability to shape our long-term roadmap through governance voting once Clearpool transitions to full decentralization.
Wrapping Up 🎁
We understand that some of these concepts may be difficult to understand for those of you who aren’t familiar with traditional financial markets, but Clearpool is a platform where borrowing and lending capital is fair, competitive, and where the best lending opportunities are unlocked for everyone.
We hope this article gives you a better understanding of the Clearpool protocol and its governance token CPOOL.
Stay tuned for the next article in our Clearpool for Beginners Series coming soon!